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Asset Watch
Wednesday, December 06 2023
The JOLTS data for October dropped to 8.3 million, falling short of the anticipated 9.3 million. This development added to the market’s perception of a weakening U.S. labor market, implying a decrease in job numbers, wage levels, and subsequently, consumer spending, leading to a lower inflation rate. Consequently, the markets have priced in interest rate cuts in the U.S. by more than 100 basis points over the next year, expecting the Federal Reserve to commence cutting rates in March or no later than May.
This week, market attention is focused on gaining further insights into the American labor market through the release of private sector jobs data (ADP) and non-farm payrolls (NFP) data, along with unemployment levels for November. Market expectations are that the U.S. economy will add 180 thousand jobs, and unemployment levels will stabilize at 3.9%. Any lower-than-expected data would reinforce the market’s belief in the conclusion of the interest rate hike cycle and the high probability of cutting rates in 2024.
As the markets priced in a potential interest rate reduction, 10-year U.S. bond yields dropped to a multi-month low, reaching 4.16%. In return, the gold price rose, surpassing $2,100 per ounce during the current week.
Chart source ADSS Platform
At the start of December, the 50-day simple moving average crossed above the 200-day moving average and generated a bullish break out pattern (golden cross). The price rallied to an all-time high this week at $2152/oz then retracted to the current trading zone of 2009-2050.
The precious metal could be on the way for a test of the high end of the aforementioned zone. A daily close above this level suggests a robust bullish momentum that could drive the price towards 2100. Nonetheless, the resistance level located at 2075 should be considered.
On the other hand, a daily close below the low end of the zone signals a weaker bullish momentum encouraging bears to take the lead and press towards 1974. That said, the support levels residing at 2000 and 1981 should be kept in focus.
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